Broker snap: Investec still cautious after Cairn's Indian sale

15th Dec 2011 12:59

Despite Cairn Energy's "early Christmas present" of a massive special dividend, Investec stays cautious on the oil giant.Following the sale of a large stake in its Indian business to Vedanta Resource, Cairn announced that it would return $3.5bn to shareholders "with a view to providing UK tax resident shareholders with the flexibility to receive cash in the form of income, capital, or a combination of both," writes Investec analyst Angus McPhall.However, McPhall notes that the firm's year-to-date performance has been poor, with the stock down 36% since the start of the year. " Even after 45% underperformance relative to Tullow, we still see only 5% upside versus 41% at Tullow.""Given a lack of success at the drill-bit in Greenland, lower GDP growth rates in India, weakness in the Indian Rupee, and no apparent 'Plan B' for exploration in 2012, we maintain our cautious hold recommendation."The net asset value-based target price is reduced from 333p to 291p.Shares were up 0.22% at 269.5p by 13:12 on Thursday.BC